Chrysler Posts $1.38 Billion 2002 Profit

JOHN PORRETTO

Published 7:00 pm, Wednesday, February 19, 2003

AP Auto Writer

Two years into a three-year turnaround plan, DaimlerChrysler AG's U.S. arm showed dramatic improvement in 2002, posting a $1.38 billion operating profit, a hefty swing to the black after losing some $2 billion a year earlier.

DaimlerChrysler said thanks to "outstanding progress" in efficiency, it exceeded its original aim of simply returning the U.S. division to profitability in 2002, even as Chrysler's full-year revenue slipped 5 percent to 60.2 billion euros ($64.8 billion) from 63.5 billion euros because of the weaker dollar.

That means Chrysler workers will get an average of $460 in profit-sharing checks for the year _ their first since 2000.

It also indicates that the restructuring started in 2001 is producing the desired results. The German-American automaker's Chrysler Group has eliminated 26,000 jobs and closed six plants in the past two years.

"One year ago, some observers were skeptical that we could achieve our ambitious targets for profitability and cost reduction during 2002, much less overachieve them," Chrysler head Dieter Zetsche said in a statement.

David Healy, an analyst with Burnham Securities Inc., said Chrysler's turnaround was aided by near-record U.S. sales volume the past two years _ more than many observers predicted.

"It's a pretty respectable turnaround given the real hemorrhaging both financially and operationally they were enduring a couple of years ago," Healy said.

Chrysler lost $4.7 billion two years ago.

In the fourth quarter, Chrysler earned 77 million euros ($81 million), in contrast to a loss of 359 million euros in the same quarter in 2001 _ but less than the 325 million euro profit in the third quarter.

"This result was achieved in a very challenging environment, as the U.S. market is still dominated by very high incentives," Schrempp told a news conference, referring to the costly come-ons such as zero-percent financing pushed by competitors General Motors Corp. and Ford Motor Co. to prop up sales.

Chrysler, which has matched incentives while criticizing the practice, shipped nearly 2.3 million vehicles in the United States last year, an increase of 4 percent.

At the same time, its total U.S. light vehicle sales declined 3 percent, as did its market share _ to 12.9 percent from 13 percent in 2001.

Yet, because of the improved bottom line, the company said it would provide profit-sharing checks of 1,200 euros ($1,290) to its 143,000 German employees, while 86,000 eligible Chrysler workers would get an average of $460.

Aaron Davis, an electrician at Chrysler's Mack Avenue Engine Plant near downtown Detroit, said most workers had written off profit-sharing, so the news was a nice surprise.

"It's incentive to try to increase profits and look forward to another check next year," said Davis, 42, a Chrysler employee for 10 years.

"This will definitely help morale," said 35-year-old Stella Hawk, Davis' colleague at the Mack plant and a Chrysler employee for 17 years.

The adjusted operating profit figures exclude financial items such as interest and taxes, and one-time costs such as those brought by the plant closings and layoffs. The company says they give the best picture of the strength of its core carmaking business.

Earlier this month, DaimlerChrysler announced a full-year net profit of 4.7 billion euros ($5.1 billion) and a fourth-quarter net profit of 168 million euros ($182 million) for the entire company. Thursday's announcement broke out results for individual divisions.

"There were more positives than negatives," said Michael Raab, an analyst at Sal. Oppenheim in Frankfurt.

The company issued a cautious 2003 forecast, avoiding a specific earnings target and saying only that earnings would be higher than 2002.

And it hedged even that, saying "a precondition for this anticipated increase is that conditions remain stable in the most important markets." It said difficult market conditions would continue, particularly in the key North American market.

In afternoon trading Thursday on the New York Stock Exchange, DaimlerChrysler's U.S. shares were off 27 cents to $29.63.

DaimlerChrysler, headquartered in Stuttgart, Germany, and Auburn Hills, Mich., is the result of the 1998 merger of Daimler-Benz and Chrysler Corp.